At high levels, around 3.5% and maybe even 4%, the Euribor is expected to stabilize towards the end of the year, following the path of the ECB’s key interest rate, which is now 2.5% after the latest increase. The next ECB increase, which is also estimated at another 50 points, is scheduled for early March, and this estimate is already reflected in the 3-month Euribor, on the basis of which all floating rate loans are assessed and which moves above 2.5%, excluding next promotion.

The de-escalation of interest rates is estimated to start from the end of the first quarter of 2024 onwards, but the decline will be gradual, bringing the average interest rate in 2024 to 2.75% and 2.55%. two years from today. The increase in interest rates significantly affects all floating rate loans directly related to Euribor, with a focus on both business loans and mortgage loans, which represent about 90% of banks’ portfolio of 115 billion euros, as well as all loans, which have been sold. in funds amounting to 87 billion euros.

According to “K”, the average spread of mortgages under management of funds is 2.5% -3%, and after the increase in interest rates, the final interest rate is close to 5.5%. In the case of banks, despite the shift to fixed-rate mortgages over the past two years, these loans represent only a small part of the banking portfolio and concern only new repayments.

Thus, most loans are significantly burdened by rising interest rates, and the burden is a function of the time the loan was contracted and the margin (spread) applied to the base interest rate. For their part, banks point out that most mortgages in the 2000s, just before the bond crisis, were at low spreads of around 1.5%, because at the time, with a big explosion in demand, they had competitive conditions. compressed profit margins. Thus, the final interest rate on these loans today is close to 4%, and the burden is lower compared to loans from the period after 2010, when credit spreads rose to 3% or even 4%.

The next increase by the ECB is also estimated at another 50 basis points and is scheduled for early March.

The premium increase also depends on the length of the loan and whether the borrower has repaid a portion of the interest that typically accrues for most of two-thirds of the total term. Depending on whether the loan is for, say, 20 years, in the early years mostly interest is paid and some part of the principal (for example, 10-90%), but this balance changes over the years and reverses when the loan is suitable. by the end. maturity. This parameter is important for the burden that someone will bear due to rising interest rates, and, according to banks, a significant part of the loans of the past has passed the “burnt” period of high interest rates.

It should be noted that many loans were restructured during the crisis, with a large increase in their maturity, and now the average remaining maturity of home loans that banks have in their portfolios is 18 years. Considering also that the average mortgage spread is between 220 and 280 pips, the average final mortgage interest rate, if Euribor is added, is already close to 5%, and so on.

The same does not apply to post-2010 loans, which, in addition to having a high spread price, did not cover most of the interest period. These loans are currently valued at around 6%-6.5% and given that the bulk of the debt is outstanding, they also bear the biggest burden and are the biggest losers from higher interest rates.